GDP at market prices. The share of Central government in this is 35.37%, i.e. roughly half of corresponding State government subsidies. The recovery-rate for the Centre, in the case of non-merit subsidies, is 12.13%, which is somewhat higher than the corresponding figure of 9.28% for the States. The difference in recovery rates is striking for non-merit social services, being 18.14% for the centre and 3.97% for the States. It is only marginally different for non-merit economic services (11.65% for Centre and 12.87% for States) where, in fact, States do better. The total non-merit subsidies for the year 1994-95 amounted to 10.71% of GDP at market prices, resulting in a combined fiscal deficit of 7.3% for the Centre, States and Union Territories. Therefore, if these subsidies were phased out, the same would have a discernible impact on the fiscal deficit. It can be done by increasing the relevant user charges, which would also lead to a reduction in their demand. Apart from these first round effects, there would also be positive secondary effects on fiscal deficit, as the overall efficiency in the economy rises with an improved utilisation of scarce resources like water, power and petroleum. With an increase in efficiency, the consequent expansion of tax-bases and rise in tax-revenues would further reduce the fiscal deficit. Benefits of subsidies The relative distribution of the benefits of a subsidy may be studied with respect to different classes or groups of beneficiaries such as consumers and producers, as also between different classes of consumers and producers. In case of food subsidy, PDS suffers from considerable leakage and apart from a low coverage of poor; the magnitude of benefit derived by the poor is very small. In case of electricity, the subsidy rates have been rising for both agriculture and domestic sectors because the unit cost has been rising faster than the relevant tariff-rate. Also, there is considerable variation in the level of per capita electricity subsidy indicates that, in the richer States, the per capita subsidy is substantially higher as compared to that in the poorer States. In case of public irrigation, water has a very high marginal productivity when used in conjunction with HYV of seeds, chemical fertilisers, power and other related inputs. It is the richer farmers who may derive relatively larger benefits because of their capacity to use these allied inputs. Subsidies to elementary education form about half of the